The accompanying notes are an integral part of these financial statements. 1

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4 CONTENTS PAGE Statement of Financial Position (Balance Sheet) 1-2 Statement of off-balance sheet items 3 Statement of profit or loss 4 Statement of profit or loss and other comprehensive income 5 Statement of changes in equity 6 Statement of cash flows 7 Statement of profit distribution 8 Notes to the financial statements 9-43 Note 1 Organization and nature of business 9 Note 2 Basis of preparation of financial statements 9-20 Note 3 Cash at banks 19 Note 4 Available for sale financial assets 21 Note 5 Factoring receivables Note 6 Tangible assets 23 Note 7 Intangible assets 24 Note 9 Current period tax assets 25 Note 10 Information on assets held for sale and assets related to the discontinued operations 26 Note 11 Prepaid expenses 26 Note 12 Other receivables 26 Note 13 Funds borrowed Note 14 Other payables 27 Note 15 Taxes and duties payable 27 Note 16 Provisions 28 Note 17 Equity Note 18 Operating income 30 Note 19 Financing expenses 30 Note 20 Operating expenses 31 Note 21 Other income 31 Note 22 Specific provision for doubtful receivables 32 Note 23 Other expenses 32 Note 24 Taxes Note 25 Related party disclosures 34 Note 26 Commitments and contingencies 35 Note 27 Financial risk management Note 28 Earnings per share 43 Note 29 Subsequent events 43

5 VAKIF FİNANS FACTORİNG HİZMETLERİ ANONİM ŞİRKETİ STATEMENT OF FINANCIAL POSITION(BALANCE SHEET) AT 31 DECEMBER 2013 (Currency: Thousands of Turkish Lira TL unless otherwise stated. ) 1-STATEMENT OF FINANCIAL POSITION -ASSETS Audited Current Period 31 December 2013 Audited Prior Period 31 December 2012 Note TL FC TOTAL TL FC TOTAL I. CASH AND CASH EQUIVALENTS II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Net) Financial assets held for trading purpose Financial assets designated at fair value through profit or loss Derivative financial assets held for trading purpose III. BANKS 3 3, ,795 65,176 10,926 76,102 IV. RECEIVABLES FROM REVERSE REPURCHASE AGREEMENTS V. AVAILABLE FOR SALE FINANCIAL ASSETS (Net) 4 2,322-2,322 2,322-2,322 VI. FACTORING RECEIVABLES 5 125,617 6, , ,927 17, , Discounted factoring receivables 1,867 1,638 3,505 39,224 1,973 41, Domestic 3,214-3,214 41,530-41, Foreign - 1,723 1,723-2,132 2, Unearned income(-) (1,347) (85) (1,432) (2,306) (159) (2,465) 6.2 Other factoring receivables 123,750 5, , ,703 15, , Domestic 123, , , , Foreign - 5,189 5,189 5,620 15,897 21,517 VII. FINANCING LOANS Consumer loans Credit cards Installment based commercial loans VIII. RECEIVABLES FROM LEASING ACTIVITIES Receivables from leasing activities Finance lease receivables Operational lease receivables Unearned income(-) Investment in progress subject to leases Advances given due to leasing activities IX. OTHER RECEIVABLES X. LOANS AND RECEIVABLES UNDER FOLLOW-UP 5 32,792 1,750 34,542 7,907-7, Factoring receivables under follow-up 55,348 3,501 58,849 19,171-19, Financing loans under follow-up Receivables from leasing activities under follow-up Specific provisions (-) (22,556) (1,751) (24,307) (11,264) - (11,264) XI. DERIVATIVE FINANCIAL ASSETS HELD FOR HEDGING PURPOSES Fair value hedges Cash flow hedges Hedges of net investment in foreign operations XII. HELD-TO-MATURITY INVESTMENTS (Net) XIII. INVESTMENTS IN SUBSIDIARIES (Net) XIV. INVESTMENTS IN ASSOCIATES (Net) XV. INVESTMENTS IN JOINT-VENTURES (Net) XVI. TANGIBLE ASSETS (Net) XVII. INTANGIBLE ASSETS (Net) Goodwill Other intangibles XVIII. PREPAID EXPENSES IXX. CURRENT PERIOD TAX ASSETS XX. DEFERRED TAX ASSETS 9 1,367-1,367 2,041-2,041 XXI. OTHER ASSETS SUBTOTAL 166,621 8, , ,958 28, ,776 XXII. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) Assets Held For Sale Assets of Discontinued Operations TOTAL ASSETS 166,648 8, , ,985 28, ,803 The accompanying notes are an integral part of these financial statements. 1

6 VAKIF FİNANS FACTORİNG HİZMETLERİ ANONİM ŞİRKETİ STATEMENT OF FINANCIAL POSITION(BALANCE SHEET) AT 31 DECEMBER 2013 (Currency: Thousands of Turkish Lira TL unless otherwise stated. ) 1- STATEMENT OF FINANCIAL POSITION - LIABILITIES AND EQUITY Audited Current Period 31 December 2013 Audited Prior Period 31 December 2012 Note TL FC TOTAL TL FC TOTAL I. DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING PURPOSE II. FUNDS BORROWED 13 52,253 41,158 93, ,204 49, ,929 III. FACTORING PAYABLES , ,084 IV. PAYABLES DUE TO LEASING OPERATIONS Finance lease payables Operational lease payables Others Deferred finance leasing expenses ( - ) V. SECURITIES ISSUED (Net) Bills Asset backed securities Bonds VI. OTHER PAYABLES VII. OTHER EXTERNAL RESOURCES PAYABLE DERIVATIVE FINANCIAL LIABILITIES HELD FOR RISK MANAGEMENT PURPOSE VIII. 8.1 Fair value hedges Cash flow hedges Hedges of net investment in foreign operations IX. TAXES AND DUTIES PAYABLES X. PROVISIONS Restructuring reserves Reserve for employee benefits Other provisions XI. DEFERRED INCOME XII. CURRENT PERIOD TAX LIABILITY XIII. DEFERRED TAX LIABILITY XIV. SUBORDINATED LOANS SUBTOTAL 52,853 41,365 94, ,318 49, ,305 XV. PAYABLES RELATED TO ASSETS FOR SALE AND DISCONTINUED OPERATIONS Held For Sale Discontinued Operations XVI. SHAREHOLDERS EQUITY 17 81,303-81,303 88,498-88, Paid-in Capital 22,400-22,400 22,400-22, Capital Reserves 28,831-28,831 28,831-28, Share Premiums Share Cancellation Profits Other Capital Reserves 28,831-28,831 28,831-28, Accumulated Other Comprehensive Income that will not be Reclassified to Profit or Loss Accumulated Other Comprehensive Income that may be Reclassified subsequently to Profit or Loss Profit Reserves 37,267-37,267 26,986-26, Legal Reserves 4,987-4,987 4,987-4, Statutory Reserves Extraordinary Reserves 32,280-32,280 21,999-21, Other Profit Reserves Profit or Loss (7,247) - (7,247) 10,281-10, Prior Periods Profit/Loss Current Period Profit/Loss (7,247) - (7,247) 10,281-10,281 TOTAL LIABILITIES AND EQUITY 134,156 41, , ,816 49, ,803 The accompanying notes are an integral part of these financial statements. 2

7 VAKIF FİNANS FACTORİNG HİZMETLERİ ANONİM ŞİRKETİ STATEMENT OF OFF BALANCE SHEET ITEMS AS AT 31 DECEMBER 2013 (Currency: Thousands of Turkish Lira TL unless otherwise stated. ) OFF-BALANCE SHEET ITEMS Audited Current Period 31 December 2013 Audited Prior Period 31 December 2012 Note TL FC TOTAL TL FC TOTAL I. REVOCABLE FACTORING TRANSACTIONS 52,069 6,666 58,735 13,844 11,910 25,754 II. IRREVOCABLE FACTORING TRANSACTIONS 16,992 4,071 21,063 62, ,967 III. COLLATERALS RECEIVED 5 and IV. COLLATERALS GIVEN V. COMMITMENTS Irrevocable commitments Revocable commitments Revocable lease granting commitments Finance lease commitments Operational lease commitments Other revocable commitments VI. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments held for risk management purpose Fair value hedges Cash flow hedges Net foreign investment hedges Derivative financial instruments held for trading purpose Forwards purchases and sales Swaps purchases and sales Options purchases and sales Futures purchases and sales Others VII. ITEMS HELD IN CUSTODY 26 35,363 35,127 70,490 32,372 30,300 62,672 TOTAL OFF-BALANCE SHEET ITEMS 105,303 45, , ,176 42, ,406 The accompanying notes are an integral part of these financial statements. 3

8 VAKIF FİNANS FACTORİNG HİZMETLERİ ANONİM ŞİRKETİ STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2013 (Currency: Thousands of Turkish Lira TL unless otherwise stated. ) INCOME STATEMENT Note Audited Current Period 1 January 31 December 2013 Audited Prior Period 1 January 31 December 2012 I. MAIN OPERATING INCOME 18 INCOME FROM FACTORING OPERATIONS 17,085 49, Interest income from factoring receivables 16,524 48, Discounted 2,318 7, Other 14,206 40, Fees and commissions received from factoring receivables 561 1, Discounted Other 550 1,406 II. FINANCING EXPENSES (-) 19 6,314 27, Interest expense on funds borrowed 5,931 27, Interest expense on factoring payables Interest expense on financial leases Interest expense on securities issued Other interest expenses Fees and commission expenses III. GROSS PROFIT / LOSS (I+II) 10,771 21,867 IV. OPERATING EXPENSES (-) 20 4,953 5, Personal Expenses 3,335 3, Employee Severance Indemnity Expense Research and Development Expenses General Administration Expenses 1,556 1, Other - - V. GROSS OPERATING PROFIT / LOSS (III+IV) 5,818 16,400 VI. OTHER OPERATING INCOME , , Interest income on banks 404 1, Interest income on reverse repurchase agreements Interest income on securities Interest income on trading financial assets Interest income on financial assets designated at fair value through profit or loss Interest income on available for sale financial assets Interest income on held to maturity investments Dividend income Trading income Derivatives Other Foreign exchange gains 209, , Other 1, VII. SPECIFIC PROVISIONS FOR LOANS AND RECEIVABLES UNDER FOLLOW-UP(-) 22 14,358 5,130 VIII. OTHER OPERATING EXPENSES (-) , , Impairment in value of securities Impairment in value of financial assets designated at fair value through profit or loss Impairment in value of available for sale financial assets Impairment in value of held to maturity investments Impairment in value of non current assets Impairment in value of tangible assets Impairment in value of assets held for sale and assets related to discontinued operations Impairment in value of goodwill Impairment in value of other intangible assets Impairment in value of subsidiaries, associates and joint-ventures Trading losses from derivatives Foreign exchange losses 209, , Other - - IX. OPERATING PROFIT/(LOSSES), NET (V+ +VIII) (6,586) 12,853 X. INCOME RESULTED FROM MERGERS - - XI. GAINS/(LOSSES) ON NET MONETARY POSITION - - XII. PROFIT/(LOSSES) FROM CONTINUING OPERATIONS BEFORE TAXES (IX+X+XI) (6,586) 12,853 XIII. PROVISION FOR TAXES FROM CONTINUING OPERATIONS (±) 24 (661) (2,572) 13.1 Current tax charge - (2,594) 13.2 Deferred tax charges due to deferred tax assets(-) (661) Deferred tax charges due to deferred tax liabilities(+) - 22 XIV. NET PROFIT/(LOSSES) AFTER TAXES FROM CONTINUING OPERATIONS (XII±XIII) (7,247) 10,281 XV. INCOME FROM DISCONTINUED OPERATIONS Income from assets held for sale Income from sale of associates, subsidiaries and joint-ventures Other income from discontinued operations - - XVI. EXPENSES FROM DISCONTINUED OPERATIONS (-) Expense from assets held for sale Expense from sale of associates, subsidiaries and joint-ventures Other expense from discontinued operations - - XVII. PROFIT/(LOSSES) BEFORE TAXES ON DISCONTINUED OPERATIONS (XV-XVI) - - XVIII. PROVISION FOR TAXES FROM DISCONTINUED OPERATIONS (±) Current tax charge Deferred tax charges/credits due to deferred tax assets(+) Deferred tax charges/credits due to deferred tax liabilities(-) - - XIX. NET PROFIT FROM DISCONTINUED OPERATIONS (XVII+XVIII) - - XX. NET PROFIT FOR THE PERIOD(XIV+XIX) (7,247) 10,281 EARNINGS PER SHARE(full TL) 28 ( ) Earnings Per Share from Continued Operations ( ) Earnings Per Share from Discontinued Operations - - DILUTED EARNINGS PER SHARE - - Earnings Per Share from Continued Operations - - Earnings Per Share from Discontinued Operations - - The accompanying notes are an integral part of these financial statements. 4

9 VAKIF FİNANS FACTORİNG HİZMETLERİ ANONİM ŞİRKETİ STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013 (Currency: Thousands of Turkish Lira TL unless otherwise stated. ) PROFIT/LOSS AND OTHER COMPREHENSIVE INCOME STATEMENT Audited Current Period 1 January - 31 December 2013 Audited Prior Period 1 January - 31 December 2012 I. CURRENT PERIOD PROFIT/LOSS (7,247) 10,281 II. OTHER COMPREHENSIVE INCOME Items that will not be Reclassified to Profit or Loss Tangible Assets Revaluation Increases/Decreases Intangible Assets Revaluation Increases/Decreases Employee Benefits Re-Measuring Loss/Income Other Comprehensive Income that will not be Reclassified to Profit or Loss Taxes related with Comprehensive Income that will not be Reclassified to Profit or Loss (13) Current Tax Income/Expense Deferred Tax Income/Expense (13) Items that may be Reclassified subsequently to Profit or Loss Foreign Exchange Differences for Foreign Currency Transactions Value Increases or Decreases on Assets Held for Sales Cash Flow Hedge Income/Losses Net Investment Hedge Income/Losses Other Comprehensive Income that may be Reclassified subsequently to Profit or Loss Taxes related with Comprehensive Income that may be Reclassified subsequently to Profit or Loss Current Tax Income/Expense Deferred Tax Income/Expense - - III. TOTAL COMPREHENSIVE INCOME (I+II) (7,195) 10,281 The accompanying notes are an integral part of these financial statements. 5

10 VAKIF FİNANS FACTORİNG HİZMETLERİ ANONİM ŞİRKETİ STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013 (Currency: Thousands of Turkish Lira TL unless otherwise stated. ) Other Accumulated Comprehensive Income that will be not reclassified to Profit/Loss Other Accumulated Comprehensive Income that may be reclassified subsequently to Profit/Loss CHANGES IN EQUITY Paid-in Capital Capital Reserves Share Premiu m Share Cancellati on Profits Other Capital Reserves Profit Reserves Legal Reserves Statutory Reserves Extraordinary Reserves Other Profit Reserves Current Period Profit/ Loss Prior Period Profit/ Loss Net Current Period Profit/ Loss Total Equity Prior Period ( ) (Audited) I. Balance at the Beginning of the Period ( ) 22,400 28, , ,289 3,790-16,499-13, ,763 II. Correction Made According to TAS Effect of Correction of Errors Effect of Changes in Accounting Policies III. New Balance (I+II) 22,400 28, , ,289 3,790-16,499-13, ,763 IV. Total Comprehensive İncome V. Cash Capital Increase VI. Capital Increase from internal reserves VII. Paid-in-Capital Inflation Adjustment VIII. Convertible Bonds IX. Subordinated Loans X. Increases / Decreases due to other changes XI. Profit for the Period ,281-10,281 10,281 XII. Profit Distribution ,697 1,197-5,500 - (13,243) Dividend Paid (6,546) - (6,546) 12.2 Transfer to Reserves ,697 1,197-5,500 - (13,243) 6, Other Balance at the End of the Period ( ) 22,400 28, , ,986 4,987-21,999-10,281-10,281 88,498 Current Period ( ) (Audited) I. Balance at the Beginning of the Period ( ) 22,400 28, , ,986 4,987-21,999-10,281-10,281-88,498 II. Correction Made According to TAS Effect of Correction of Errors Effect of Changes in Accounting Policies III. New Balance (I+II) 22,400 28, , ,986 4,987-21,999-10,281-10,281 88,498 IV. Total Comprehensive İncome V. Cash Capital Increase VI. Capital Increase from internal reserves VII. Paid-in-Capital Inflation Adjustment VIII. Convertible Bonds IX. Subordinated Loans X. Increases / Decreases due to other changes XI. Profit for the Period (7,247) - (7,247) (7,247) XII. Profit Distribution , ,281 - (10,281) - (10,281) Dividend Paid Transfer to Reserves , ,281 - (10,281) - (10,281) Other Balance at the End of the Period ( ) 22,400 28, , ,267 4,987-32,280 - (7,247) - (7,247) 81,303 1, Revaluation increase/decrease of property and equipment, 2, Employee benefits re-measuring income/loss, 3, Other (Other comprehensive income related with equity pick up investment portions and accumulated other comprehensive income components that will not be re-classified to profit/loss) 4, Foreign currency translation differences for foreign operations, 5, Net change in fair value of available-for-sale financial assets, 6, Other (Cash flow hedge income/ (losses), accumulated other comprehensive income components that may re-classified subsequently to profit/loss) The accompanying notes are an integral part of these financial statements. 6

11 VAKIF FİNANS FACTORİNG HİZMETLERİ ANONİM ŞİRKETİ STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated. ) A. CASH FLOWS FROM OPERATING ACTIVITIES Note Audited Current Period 1 January - 31 December 2013 Audited Prior Period 1 January - 31 December Operating profit before changes in operating assets and liabilities 5,911 14, Interests Received/Factoring Income 14,974 52, İnterest Paid / Lease Expenses (6,217) (27,911) Lease Expenses Dividends Received Fees and Commissions Received 561 1, Other Income Collections from Non-performing Receivables 1, Payments to Personnel and Service Suppliers (3,324) (3,544) Taxes Paid (627) (2,103) Others (771) (6,004) 1.2 Changes in operating assets and liabilities 12, , Net (Increase) Decrease in Factoring Receivables 14, , Net (Increase) Decrease in Other Assets Net Increase (Decrease) in Factoring Payables (1,085) 1, Net Increase (Decrease) in Funds Borrowed Net Increase (Decrease) in Overdue Payables Net Increase (Decrease) in Other Liabilities (491) (1,518) I. Net cash from operating activities 18, ,324 B. CASH FLOWS FROM INVESTING ACTIVITIES 2.1 Acquisition of Subsidiaries, Associates and Joint Ventures Disposal of Subsidiaries, Associates and Joint Ventures Purchases of property and equipment 6 (30) (105) 2.4 Fixed Assets and Intangible Assets Financial assets available for sale Proceeds from disposal of available for sale financial assets Purchase of held-to-maturity investments Held-to-Maturity Investments Other - - II. Net cash from operating activities (8) (105) C. CASH FLOWS FROM INVESTING ACTIVITIES 3.1 Cash obtained from funds borrowed and securities issued 4,618, , Cash used for repayment of funds borrowed and securities issued (4,708,978) (479,748) 3.3 Equity instruments issued Dividends paid - (6,546) 3.5 Payments for finance leases (383) Others - (661) III. Net cash from/(used in) financing activities (90,998) (360,330) IV. Effect of change in foreign exchange rates on cash and cash equivalents - 2 V. Net increase in cash and cash equivalents 72,206 74,891 VI. Cash and cash equivalents at the beginning of the year 2 76,000 1,109 VII. Cash and cash equivalents at the end of the year 2 3,794 76,000 The accompanying notes are an integral part of these financial statements. 7

12 VAKIF FİNANS FACTORİNG HİZMETLERİ ANONİM ŞİRKETİ STATEMENT OF PROFIT DISTRIBUTION FOR THE YEAR ENDED 31 DECEMBER 2013 (Currency: Thousands of Turkish Lira TL unless otherwise stated. ) I. DISTRIBUTION OF CURRENT YEAR PROFIT Current Period 31 December 2013 (*) Prior Period 31 December NET PROFIT FOR THE YEAR (6,586) 12, TAXES AND LEGAL DUTIES PAYABLE (-) (661) (2,572) Corporate tax (income tax) - (2,594) Withholding tax Other taxes and duties (661) 22 A. NET PROFIT FOR THE YEAR ( ) (7,247) 10, ACCUMULATED LOSSES (-) FIRST LEGAL RESERVES (-) OTHER STATUTORY RESERVES (-) (**) - (22) B NET PROFIT AVAILABLE FOR DISTRIBUTION [(A-( )] (***) (7,247) 10, FIRST DIVIDEND TO SHAREHOLDERS (-) To owners of ordinary shares To owners of privileged shares To owners of redeemed shares To profit sharing bonds To holders of profit and loss sharing certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO BOARD OF DIRECTORS (-) SECOND DIVIDEND TO SHAREHOLDERS (-) To owners of ordinary shares To owners of privileged shares To owners of redeemed shares To profit sharing bonds To holders of profit and loss sharing certificates SECOND LEGAL RESERVES (-) STATÜ S RESERVES (-) EXTRAORDINARY RESERVES OTHER RESERVES SPECIAL FUNDS - - II. DISTRIBUTION FROM RESERVES DISTRIBUTION OF RESERVES SECOND LEGAL RESERVES (-) DIVIDENTS TO SHAREHOLDERS (-) To owners of ordinary shares To owners of privileged shares To owners of redeemed shares To profit sharing bonds To holders of profit and loss sharing certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO BOARD OF DIRECTORS (-) - - III. EARNINGS PER SHARE 3.1 TO OWNERS OF ORDINARY SHARES (TL) ( ) TO OWNERS OF ORDINARY SHARES ( % ) (32.35) TO OWNERS OF PRIVILEGED SHARES (TL) TO OWNERS OF PRIVILEGED SHARES ( % ) - - IV. DIVIDEND PER SHARE 4.1 TO OWNERS OF ORDINARY SHARES (TL) TO OWNERS OF ORDINARY SHARES ( % ) TO OWNERS OF PRIVILEGED SHARES (TL) TO OWNERS OF PRIVILEGED SHARES ( % ) - - (*) In the current year there is no profit to be distributed. (**) Deferred income tax is not subject to dividend distribution. (***) Does not include deferred income taxes. The accompanying notes are an integral part of these financial statements. 8

13 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated) 1 ORGANIZATION AND NATURE OF BUSINESS Vakıf Finans Factoring Hizmetleri Anonim Şirketi ( the Company ) was incorporated on 28 January 1998 to provide factoring services to industrial and commercial firms. The Company maintains its operations factoring, that is a financial product which ensure "guarantee", "finance" and "collection" services by way of assignment to a company called "factor" of the trade receivables arising from sale of goods and/or services by firms to within the country. The company serves both domestic and international factoring services. The Company operates in accordance with Financial Lease, Factoring and Financing Companies Law published on the Official Gazette no dated 13 December 2012 and Regulation on Principles for Establishment and Operations of Finance Lease, Factoring and Financing Companies of Banking Regulation and Supervision Agency (BRSA). As at 31 December 2013 and 2012, the composition of the authorized and paid-in share capital are as follows: 31 December 2013 Share (%) 31 December 2012 Share (%) Türkiye Vakıflar Bankası TAO 17, , Güneş Sigorta A.Ş. 3, , Vakıf Finansal Kiralama A.Ş Vakıf Per. Öz. Sos. Güv. Vakfı Vakıf Pazarlama Sanayi ve Tic. AŞ Share capital 22, , The Company has 29 employees as at 31 December 2013 (2012: 32 employees). The Company is registered in Turkey and located in the address below: Gazeteciler Sitesi, Yazarlar Sokak, No:10, Esentepe, Şişli / İSTANBUL. The Company carries its operations mainly in one geographical region (Turkey). 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS 2.1 Basis of Preparation Basis of Preparation of Financial Statements The Company prepared accompanying financial statements due to the Regulation on Accounting Practices and Financial Statements of Financial Leasing, Factoring and Financing Companies and the Communiqué on Uniform Chart of Accounts and Prospectus to be implemented by Financial Leasing, Factoring and Financing Companies and on Financial Statements to be announced to Public published in the Official Gazette dated 24 December 2013 and numbered and Turkish Accounting Standards published by Public Oversight Accounting and Auditing Standards Institute (POAAS), Turkish Financial Reporting Standards and other regulations, communiqués, and circulars announced by the Banking Regulation and Supervision Agency ( BRSA ) in respect of accounting and financial reporting (together referred as Reporting Standards ). 9

14 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated) 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.1 Basis of Preparation (Continued) The financial statements, other than financial assets at fair values through profit and loss and financial liabilities, prepared on the historical cost basis. Additional Paragraph for Convenience Translation to English The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries, in which the accompanying financial statements are to be distributed, and International Financial Reporting Standards ( IFRS ), may have significant influence on the accompanying financial statements. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in such countries and IFRS Functional and Presentation Currency The presentation and functional currency of the Company is Turkish Lira ( TL ). The financial statements of the Company have been adjusted for the effects of inflation in accordance with TAS 29 Financial Reporting in Hyperinflationary Economies until 31 December By a circular issued on 28 April 2005, BRSA declared that the application of inflation accounting has been ceased to be applied for the companies operating in Turkey starting from 1 January 2005, since the provisions of hyperinflationary economy do not exist anymore Accounting estimates The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. In preparation of the financial statements, the significant estimates and judgments used by the Company are included in the following notes: Note 5 Factoring Receivables Note 9 Deferred Tax Changes in Accounting Policies Except for the new standards summarised below, the accounting policies applied for the year ended 31 December 2012 have been applied consistently for the year ended 31 December 2013 in preparing these financial statements. The material changes in accounting policies are applied on a retrospective basis and the comparative financial statements have been restated where applicable. The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2013: TFRS 13 Fair Value Measurement (see note (i)) TAS 1 Presentation of Financial Statements (Amendments) (see note (ii)) TAS 19 Employee Benefits (2011) (see note (iii)) The nature and effects of the changes are explained below in detail. 10

15 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated) 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS(Continued) Changes in Accounting Policies(Continued) (i) Fair Value Measurement TFRS 13 Fair Value Measurement establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other TFRSs. It unifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including TFRS 7 Financial Instruments: Disclosures. In accordance with the transitional provisions of TFRS 13, the Company has applied the new fair value measurement guidance prospectively and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the Company s assets and liabilities. (ii) Presentation of items of other comprehensive income As a result of the amendments to TAS 1, the Company has modified the presentation of profit or loss and the items of Other Comprehensive Income ( OCI ) in its statement of profit or loss and OCI, to present separately items that would be reclassified to profit or loss from those that would never be. Comparative information has been re-presented accordingly. The amendments to TAS 1 had no significant impact on the profit or loss and other comprehensive income and assets and liabilities. (iii) Employee benefits As a result of the amendments to TAS 19 (2011), all actuarial gains and losses are recognised in other comprehensive income. Prior to these amendments, all actuarial gains and losses had been recognised in profit or loss. As the do not have significant impact on the comparative financial statements for the year ended 31 December 2012, they have not been restated. Changes in the format requirements of the financial statements As a result of new format requirements by Regulation on Accounting Practices and Financial Statements of Financial Leasing, Factoring and Financing Companies published in the Official Gazette dated 24 December 2013 and numbered by BRSA, the below mentioned classifications have been made in the comparative financial statements for the year ended 31 December 2012 presented in the accompanying statement of financial position: Miscellaneous receivables classified on other assets amounting to TL 51 on the Company s consolidated financial statements as at 31 December 2012 are re-classified to other receivables in the comparative financial statements. Short term prepaid expenses classified on other assets amounting to TL 193 on the Company s consolidated financial statements as at 31 December 2012 are re-classified to prepaid expenses in the comparative financial statements. Interest paid on operating profit before changes in operating assets and liabilities-other amounting to TL 27,911 on the Company s consolidated financial statements as at 31 December 2012 are re-classified to operating profit before changes in operating assets and liabilities-interest paid in the comparative financial statements. 11

16 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated) 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.1 Basis of Preparation (Continued) Changes in accounting estimates and errors If the changes in accounting estimates relate to a specific period, they are applied in the period they relate to whereas if the changes are related to future periods, they are applied both in the period the change is made and prospectively in the future periods. There have been no material changes in current period s accounting estimates. Material accounting errors are adjusted retrospectively and prior period s financial statements are restated. There have been no material changes in current period s accounting errors Comparative Information and Restatement of Prior Period Financial Statements The Company s financial statements have been prepared comparatively with the prior period in order to give information about financial position and performance. If the presentation or classification of the financial statements is changed, in order to maintain consistency, financial statements of the prior periods are also reclassified in line with the related changes with respective disclosures for the major differences Standards and interpretations came into force in 2013 The company has applied mandatory TAS / TFRS published by the POAAS at 31 December 2013 and the related statements and comments New standards and interpretations not yet adopted as at 31 December 2013 A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 31 December 2013, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company Offsetting The Company s financial assets and liabilities are offset and the net amount is presented in the balance sheet if and only if there is a legally enforceable right to set off the amounts and there is an intention to settle on a net basis or to realize the asset and settle the liability simultaneously. 2.2 Summary of significant accounting policies (a) Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise cash and cash equivalents, factoring receivables, available for sale financial assets, funds borrowed, and other miscellanous payables. Non-derivative financial instruments are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. Cash at banks comprises time deposits with an original maturity less than three months. Cash at banks reflects short-term investments; highly liquid, with an original maturity less than three months. Time deposits are recognised at discounted values by using effective interest rate. 12

17 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated) 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies(continued) (a) Financial instruments(continued) Non-derivative financial instruments(continued) The Company initially recognizes factoring receivables and payables on the date that they are originated. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, factoring receivables are measured at amortized cost using the effective interest method, less any impaired losses. Provision for doubtful factoring receivables and other receivables are recognized as an expense and written off against the profit for the year. Provision for non-performing receivables is allocated assessing the Company s loan portfolio, quality and risk and considering the economic conditions and other factors including the related legislation against the potential losses that may be resulted from the current factoring receivables. In accordance with the Regulation on Accounting Practices and Financial Statements of Financial Leasing, Factoring and Financing Companies published in the Official Gazette dated 24 December 2013 and numbered and the Communiqué Uniform Chart of Accounts to be implemented by Financial Leasing, Factoring and Consumer Financing Companies and its Explanation published in the the same date and number the Company s specific provision rate allocated for the below factoring receivables considering their collaterals 20%, at a minimum, for finance lease receivables overdue more than 90 days not exceeding 180 days, 50%, at a minimum, for finance lease receivables overdue more than 180 days not exceeding 360 days; and 100%, at a minimum, for finance lease receivables overdue more than 1 year. The Company classifies its overdue factoring receivables not exceeding 360 days as under the Non-Performing Receivables and classifies its factoring receivables overdue more than 1 year under Uncollectible Receivables. Available-for-sale financial assets consist of financial asstes except; held-to-maturity investments and financial assets at fair value through profit and loss. Available-for-sale financial assets are subsequently measured at their fair values. However, the fair values can not be determined reliably, for those who have a fixed maturity carried at amortized cost using the effective yield method, the fair value of fixed maturity for non-pricing models or discounted cash flow techniques are measured. Unrecognised gains or losses derived from the difference between their fair value and the discounted values calculated per effective interest rate method are recorded in Fair value reserve under shareholders equity. In case of sales, the realised gain or losses are recognised directly in the statement of operations. Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Borrowings are subsequently measured at amortized cost using the effective interest method plus the interest expense recognized on effective interest method. Interest income and expense are accounted as described in Note 2.2.(h). Other non-derivative financial instruments are measured at amortized cost using the effective interest method less any impairment. A financial instrument is recognised if the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Company s contractual rights to the cash flows from the financial assets expire or if the Company transfers the financial asset to another party without retaining control or with all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Company commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Company s obligations specified in the contract expire or are discharged or cancelled. 13

18 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated) 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) (b) (c) (d) Tangible assets and depreciation Items of tangible assets acquired before 1 January 2005 are measured at cost restated for the effects of inflation in TL units current at 31 December 2004 pursuant to TAS 29 less accumulated depreciation and impairment losses. Tangible assets acquired after 31 December 2004 are measured at cost, less accumulated depreciation and impairment losses. (i) Subsequent costs The cost of replacing part of an item of tangible assets is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of the day-to-day servicing of tangible assets are recognized in the income statement as incurred. (ii) Depreciation Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of each part of an item of tangible assets. The estimated useful lives for the current and comparative periods are as follows: Definition Furniture and fixtures Motor vehicles Leasehold Year 5 years 5 years 5 years Leasehold improvements are amortized over the periods of the respective leases on a straight-line basis. Intangible assets Intangible assets represent computer software licenses and rights. Intangible assets acquired before 1 January 2005 are measured at cost restated for the effects of inflation in TL units current at 31 December 2004 pursuant to TAS 29, less accumulated amortization, and impairment losses. Intangible assets acquired after 31 December 2004 are measured at cost, less accumulated amortisation, and impairment losses. Amortization is recognized in the income statement on a straight-line basis over the estimated useful lives of intangible assets. Definition Year Computer software license Impairment Financial Assets 3-5 years A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. The Company recognizes specific provision for factoring receivables in accordance with the Communiqué No on the the Regulation on Accounting Practices and Financial Statements of Financial Leasing, Factoring and Financing Companies and Communiqué Uniform Chart of Accounts to be implemented by Financial Leasing, Factoring and Consumer Financing Companies and its Explanation published in the the same date and number issued at 24 December 2013 by BRSA. 14

19 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated) 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) (d) (e) Impairment (Continued) Financial Assets (continued) An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and availablefor-sale financial assets that are debt and equity securities, the reversal is recognised in the income statement to the extent that the impairment loss in respect of a financial asset was not recognized in the previous year. Non-financial assets The carrying amounts of the Company s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses recognised in prior years other assets are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Capital increases Share capital increases from existing shareholders are accounted for at par value as approved at the annual meeting of shareholders. 15

20 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated) 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) (f) Reserve for severance payments In accordance with the existing social legislation in Turkey, the Company is required to make lump-sum payments to employees whose employment is terminated due to retirement or for reasons other than resignation or misconduct. Those payments are calculated with basis of taking the upper limit of severance payment at the balance sheet date. In accordance with TAS 19, Employee Benefits, the Company calculated the severance pay liability incurred due to retirement of its employees by discounting the future liabilities to their present values, by using statistical method and reflected to the financial statements. The main estimates used are as follows: Discount Rate 3.77% 1.91% Expected Salary/Limit Increase Rate 6.00% 5.00% Expected severance payment benefit ratio 100% 100% (g) The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Since the upper limit of reserve for severance payment has been adjusted two times in a year, the Company has used the upper limit amounting TL 3,254 as at 31 December 2013 (31 December 2012: TL 3,034) for the calculation of reserve for severance payments. Provisions, contingent assets and liabilities In accordance with TAS 37, Provisions, Contingent Liabilities and Contingent Assets, a provision is recognized when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the specified criteria are not met, the Company discloses the related issues in the accompanying notes. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability if the time value of the money is significant to the provision. Contingent assets are disclosed in the notes and not recognized unless it is realized. (h) Income and expense recognition (i) Factoring income Factoring revenue consists of factoring interest and commission income collected or accrued on advances given to the customers. Factoring interest and commission income is recognized on accrual basis. (ii) Other income and expenses Other income and expenses are recognized on an accrual basis. (iii) Finance expenses Other interest income and expense are recognized on an accrual basis using effective interest method. 16

21 (Currency: Thousands of Turkish Lira ( TL ) unless otherwise stated) 2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Continued) 2.2 Summary of significant accounting policies (Continued) (i) (j) Income tax Tax provision of the period includes the current (corporate tax) and deferred tax. Corporate Tax Current tax is the tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred Tax Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or their tax assets and liabilities will be realized simultaneously. According to TAS 12, Income Taxes ; deferred tax assets and liabilities are recognized in the accompanying financial statements, using the balance sheet method, on all taxable temporary differences to the extent that they are expected to increasing or decrease on the income tax payable in the period when they will reverse. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deferred tax asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is calculated using the tax rates that are expected to be valid at the time that the temporary differences will close. Valuation of assets on the statement of income as a result of these differences and deferred tax income or expense in the income statement on the relevant valuation of the asset is accounted for in equity as a result of the differences, the related deferred tax effect is also recognized in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Related parties In accordance with TAS 24, Related Party Disclosures shareholders, key management and board members, in each case together with companies controlled by or affiliated with them, and associated companies are considered and referred to as related parties. Related party transactions consist of the transfer of the assets and liabilities between related parties by a price or free of charge. For the purpose of the accompanying financial statements, shareholders of the Company the companies controlled by/associated with them, key management and the Board members of the Company are referred to as related parties. 17